Ripple CTO Dispels XRP Loss Concerns, Assures Value Stability

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Ripple CTO David Schwartz has brought relief to the XRP community by clarifying that the implementation of the automated market maker (AMM) protocol in the XRP Ledger makes it nearly impossible to experience losses. Hence, the recent amendment, With 28 out of 35 votes secured and a solid 62% consensus, the XRPL is on the brink of a game-changing transformation. 

Excited to know what it all means, read on!

Understanding the AMM Protocol

Debunking the myths around the risk of losing XRP, Schwartz addressed the community queries with ease. He explained the AMM protocol holds a unique strategy, where liquidity providers receive tokens specific to the AMM. The protocol then aims to ensure that the value of these tokens increases over time, even during periods of market volatility.

However, Schwartz has also hit the hard side with potential downfall despite the protocol’s inherent stability. While losses are theoretically minimized, users may not experience as much profit as holding the underlying assets during price surges. Plus, the Automated Market Makers (AMMs) don’t create transactions themselves. Instead, they offer liquidity when users engage in OfferCreate and Payment transactions.

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Addressing Other Problems

On the flip side, another user raised concerns about network issues and an unresolved online bug. Schwartz was quick to respond to fix the bug and suggested trying dynamic self-tuning for better efficiency. Moreover, the amendment focuses on Automated Market Makers (AMMs), which enhance decentralized exchanges by algorithmically pricing assets, enabling peer-to-peer token trading through smart contract-secured liquidity pools and reducing exchange fees as token reserves increase.

He further cautions users about counterparty risk, since the exposure to at least two assets, including stable ones like USD, could pose challenges. While aiming to reassure XRP holders of the protocol’s protection against value losses, Schwartz also mentions the potential risks associated with changing market dynamics and unpredictable issues in the AMM implementation or the XRP Ledger. 

In the meanwhile, the amendment, bringing the AMM feature to the XRP Ledger, is close to gaining validator consensus. As of yesterday, there was 60% consensus, with 21 “Yea” votes. The latest update shows a 62% consensus, with 28 “Yea” votes.